Sat Nov 2, 2019, 12:06 PM

It's different this time. Or, maybe not.

New York Fed’s Repo Loans Are Foaming the Hedge Fund Runways

There is growing evidence that the New York Fed, the Wall Street feeding tube team of the Federal Reserve Board of Governors, is using its massive new repo loan operations to securities firms (primary dealers) to foam the Wall Street runways to try to avoid a crash landing as money gushes out of hedge funds by the tens of billions of dollars.

According to a report at eVestment, investors pulled $29.37 billion from hedge funds in the third quarter of this year, bringing the total year-to-date to an eyebrow-raising $76.86 billion. That’s more than twice the amount that was withdrawn in all of last year. Hedge funds are highly-leveraged, so $76.86 billion in withdrawals could translate into hundreds of billions of dollars of liquidations in stock and bond markets. The report further notes that this is the “sixth consecutive quarterly outflow.”

If the New York Fed is willfully foaming the runways for Wall Street to cushion the unwinding of illiquid assets at hedge funds to meet withdrawal requests, it would not be the first time that there has been a surreptitious foaming of the runways for Wall Street hubris. (It’s fairly safe to assume that Wall Street investment banks created the illiquid assets that are now clogging the financial plumbing at hedge funds and mutual funds just as their subprime securitizations blew up the Street in 2008.)

According to Barofsky’s account in his book, the Home Affordable Modification Program (HAMP) did not have a primary objective of keeping struggling families and children in their homes. It’s real goal, according to then U.S. Treasury Secretary Tim Geithner, was to “foam the runway” for the banks. Where did Tim Geithner come from? He had been at the helm of the Fed’s Wall Street bailout as President of the New York Fed. He “failed up” to the position of U.S. Treasury Secretary.


Keep in mind this isn't related to trump's administration directly. The banks and wall street will do what they can to put themselves first in line ( like the last time ) to help themselves. They have an inside view of who is over leveraged, under stress in the global market place, targets for take overs, are holding delinquent loans and such.

There are small hints, like this one, that describe the history of causes and effects in financial markets.

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